Apr 08, Colombo: Sri Lanka’s Central Bank releasing the monetary policy review on Thursday said the Monetary Board has decided to continue the current accommodative monetary policy stance.
Accordingly, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 07 April 2021, has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 percent and 5.50 percent, respectively.
The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts, the Bank said in its review.
The Board said it remains committed to maintaining the low interest rate structure, thereby ensuring continued support for a sustained economic recovery, in the context of the prevailing low inflation environment and well anchored inflation expectations.
The Monetary Board noted that while the global economy is expected to recover faster than expected, supported by policy stimulus measures and the rollout of COVID-19 vaccines and the Sri Lankan economy rebounded notably from the effects of the COVID-19 pandemic.
Although the contraction of the Sri Lankan economy at 3.6 percent in 2020 was lower than initial projections, the Sri Lankan economy grew by 1.3 percent in the last quarter of 2020 from a year earlier despite the second wave of COVID-19 in the country
The review highlighted that the external sector remains resilient despite some near term challenges and market interest rates declined to historic lows, reinforcing the recovery of activity.
Credit to the private sector expanded notably thus far in 2021, reflecting the impact of growth supportive policies.
The Central Bank expects the Inflation to remain subdued in the near term and any upward pressures over the medium term could be mitigated, to a large extent, by the envisaged supply side improvements.
The Central Bank said it will continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take proactive measures to help the economy to sustain the growth trajectory, while maintaining inflation in the targeted 4-6 per cent range under the flexible inflation targeting framework.